2/23/2009

One of the wealthiest men in Poland, Zygmunt Solorz-Żak is set to take over Slask Wroclaw before the start of the new round according the journal "Sport". In two years the budget of the "Wojskowi" is to be set at 80 million zloty thus making Slask the richest club in Poland.DevotedThe club from Wroclaw, with the help from Solorz-Żak, is to build one of the largest shopping centers in Poland. Profits from this project will be devoted to football and are estimated to give Slask about 40 million zloty per year. Together with other income, this would create a club budget, reaching 80 million per season.

Financial leaderShould this project succeed Śląsk would have approximately two times more money than the current leading Polish clubs such as KKS Lech Poznan, Wisla Krakow and Legia Warsaw. Currently Slask's budget is estimated at 20 million zloty and about less than half of that amount is taken from the municipal fund. Source:By Michał Jankiewicz, polishsoca.com

2/20/2009

Strong public finances and quick adoption of the euro are the best remedy for Poland's deepening economic turmoil, the country's finance minister said Thursday, as new figures showed a sharp drop in industrial production.

"Secure public finances and a quick adoption of the euro are the best way out of the crisis for Poland," Jacek Rostowski told parliament.

Euro membership is still years away, but the subject gained new urgency after Eastern European currencies and stock markets were hit in recent days by continuing bad economic news.

Poland and its zloty have been suffering after initially avoiding the worst of the initial fallout triggered by the collapse of banks and financial institutions in the United States and western Europe.

The zloty stood at 4.73 to the euro on Thursday — better than Wednesday's level of 4.89. That good news, however, was tempered by the Central Statistical Office's announcement that Poland's industrial production dropped 14.9 percent in January compared with the same month last year.It was the third consecutive month of declining industrial production — a key indicator for the overall health of the economy.

Prime Minister Donald Tusk said earlier this month that Poland would stick to its plans to adopt the euro in 2012, but acknowledged that the financial crisis could threaten that goal.

The government has refused to increase the budget deficit even after the crisis pushed down 2009 growth estimates from around 3.7 percent to 1.7 percent. Instead, it opted earlier this month to find 19.7 billion zlotys ($5.5 billion) in savings in the 2009 budget.

"We are ready to find more savings, and if that doesn't suffice we don't want to raise taxes or increase the budget deficit, but we have to be prepared for a situation in which we have to choose the lesser evil," Rostowski said.

Danske Bank chief analyst Lars Christensen said Poland's public finances "are relatively strong, both in a central European and even a European perspective," and that the government is "more or less on track and moving in the right direction."

Before adopting the euro, prospective members are required to spend at least two years in an exchange rate mechanism, or ERM-II, that demands low and controlled inflation, healthy public finances and a budget deficit below 3 percent. Meeting Poland's 2012 euro target would require Warsaw to start that process this year.

Analyst Christensen said the government is veering onto a "dangerous path" with its continued talk "about ERM-2 and euro adoption when it is clear that there is no commitment on the other side of the table from the ECB (European Central Bank) or the EU Commission."

Christensen said such talk raises too many questions — such as where to peg the zloty — and "creates uncertainty rather than certainty."

Rostowski, who has been criticized by the opposition for his handling of the economy in the face of the turmoil, said adopting the euro would shield Poland's currency from pressures that have seen the zloty drop as much as 15 percent in 2009 to 4.9 against the euro and pushed up foreign debt payments.

"Our ambition to quickly join the euro stems from the fact that it is the best means to fight the crisis in Poland," Rostowski said.

The 16 countries using the euro — including Poland's neighbor Slovakia, which joined Jan. 1 — have seen growth plummet and strain on their public finances, but have not had to deal with added pain of sharp currency devaluations. Some non-euro countries, such as Iceland, Hungary, and Ukraine, have needed IMF bailouts after their currencies plunged.Source: iht.com

The United States urged Poland Thursday to be patient over a missile defence deal it inked with Washington while President Barack Obama's team reviews the controversial multi-billion dollar shield.

"What I told the defense minister today is that they have to give us a little more time to review these things," US Defense Secretary Robert Gates said at a NATO meeting in Krakow, southern Poland.

Gates said no final decision on the shield, which has enraged Russia, has yet been made.

"Between the economic crisis, Afghanistan and Iraq the administration has not yet reviewed where it is on a whole range of issues including relationships with our allies, the missile defense program, the relationship with the Russians."

Former president George W. Bush launched plans to extend the US missile shield into Europe, basing 10 interceptors in Poland linked to a radar in the Czech Republic to counter any threat from "rogue states," primarily Iran.

But Obama's administration has begun a review of the project's costs and technical feasibility, a move which has eased fears in Russia that the shield was aimed at it.

Polish Defence Minister Bogdan Klich said talks with Washington on implementing the deal, and in particular the stationing of US Patriot missiles in Poland, were ongoing.

"We must be patient and wait until the new administration in Washington will end the ongoing review and we will receive a clearer and forward looking position," Klich said after talks with Gates.

"I reminded him (Gates) that the agreements that were signed last year should be implemented," Klich told AFP after the meeting.

Klich however said talks at deputy ministerial level on technical aspects of the controversial US plan -- the benefits Poland stood to gain from the deal -- "are on track."

The minister told AFP there was no delay "on the topic of the SOFA (Status of Forces Agreement) supplemental agreement; we are speaking about implementation deals on the (missile) base agreement and the topic of locating American Patriot missiles in Poland."

Earlier Thursday Gates reiterated the Obama administration's position on the missile shield.

"We are concerned about the Iranian missile threat and as long as that threat exists we will continue to pursue missile defense, as long as we know it will work and as long as it is cost effective.

"But we will pursue it not only with our NATO allies but also with the Russians."

The August 14, 2008 missile defence deal inked by Washington and Warsaw sparked outrage in Moscow which threatened to aim its own missiles at the planned US installations in Europe.

Washington had wanted the Polish and Czech installations up and running by 2011-2013, to complete its system already in place in the United States, Greenland and Britain.

Washington insists the shield -- endorsed by NATO at it's February 2008 summit -- is in no way aimed at Russia.

The United States warns that Iran could develop long-range missiles capable of carrying nuclear warheads by 2015-2017.

Quoted by the Czech CTK agency in Washington earlier this month, Czech Foreign Minister Karel Schwarzenberg suggested the Czech radar facility was likely to be delayed for three years while the Obama review was conducted.

"Czechs will fully understand it if the US administration puts off the construction of the radar base by three years. We will not be basically opposed to this," Schwarzenberg said.

Missile defence is expected to figure high on the agenda of Russian Prime Minister Vladimir Putin during a planned visit to Poland in the next few months, his first in seven years.

In late January, Polish Prime Minister Donald Tusk said he was confident Russia would freeze a move to deploy missiles in the Kaliningrad region, on Warsaw's doorstep, in retaliation for the US deployment in Poland. Source:AFP

Feb. 19 (Bloomberg) -- Poland’s zloty, stocks and bonds led a rally in east European markets after the government pledged to support the currency and reaffirmed its commitment to adopt the euro in 2012.

Warsaw’s benchmark stock index soared the most in almost three months, the zloty jumped as much as 2.9 percent and government bond prices rose as Deputy Finance Minister Ludwik Kotecki told Gazeta Prawna the currency will strengthen in May or June as the country plans to join the euro. Prime Minister Donald Tusk said today the currency must be protected “at any cost.”

The Czech koruna and Hungarian forint also advanced as Goldman Sachs Group Inc. said it ended bets on a further depreciation and a Czech newspaper report signaled the central bank may enter the market.

“The zloty is setting an upbeat tone for the region’s currencies on the intervention and euro-adoption plans,” said Marcin Grotek, an analyst at Raiffeisen Bank in Warsaw. “We’ve also heard verbal intervention in the Czech Republic, and the Hungarian government is talking about unconventional ways to defend the forint. All that is helping eastern European markets gain.”

The zloty strengthened to 4.6799 per euro at 4:33 p.m. in Warsaw. Poland will continue to sell euro funds from the European Union on the interbank market, PAP newswire reported, citing Finance Minister Jacek Rostowski. Adopting the euro is the “best remedy” for the economy amid the global financial crisis, he told parliament.

Best Performer

The Polish currency was the best-performer among emerging- market counterparts in the past two days, advancing 5.4 percent. It rebounded from an almost five-year low on Feb. 17 after Moody’s Investors Service said banks with east European subsidiaries may face rating downgrades.

The gain in government debt pushed the yield of the five- year note 2 basis points lower to 5.89 percent. Bond yields move inversely to prices.

“Government debt prices are gaining on the zloty’s advance, though liquidity is still low,” said Maciek Slomka, head of fixed income in Warsaw at Bank Pekao SA. “The euro sales by the government, comments on euro entry plans and the Goldman report pushed the markets up.”

The Czech koruna advanced as much as 1.5 percent after Mlada Fronta Dnes newspaper cited central bank Deputy Governor Miroslav Singer as saying he would not rule out further use of monetary policy tools, including verbal intervention, to support the currency. The koruna was last 0.6 percent higher at 28.770 per euro.

‘Non-Conventional Intervention’

The Hungarian forint jumped as much as 1.4 percent and traded at 302.00 per euro, compared with a record low of 309.71 two days ago. Hungarian Prime Minister Ferenc Gyurcsany said yesterday he asked central bank President Andras Simor and Finance Minister Janos Veres to seek a “non-conventional intervention opportunity that can help in the defense of the Hungarian forint.”

The euro snapped three days of losses against the dollar on speculation German Chancellor Angela Merkel will signal Europe’s largest economy plans to help ease the financial turmoil in the region.

“We have long had the view that CEE3 currencies will likely underperform on the basis of unsustainable external imbalances,” London-based analysts Thomas Stolper and Themos Fiotakis at Goldman Sachs wrote in a note sent to clients late yesterday. “But after the rapid depreciation in recent weeks and months we now see several factors that make short positions in eastern European currencies less of a one-way bet.”

Poland’s WIG20 Index rallied 68.16, or 5.1 percent, to 1,405.94, as a rebound in the zloty boosted financial shares, calming concerns about provisions linked to currency options. Hungary’s BUX Index gained 2.9 percent, the most since Jan. 6, and the Czech PX Index rose 4.5 percent, the most in three months.

“The currency rebound pushed the banks up, no doubt about it,” said Marek Juras, head of equity research at Bank Zachodni WBK SA in Warsaw. “That brought some relief about earnings.”

The financial industry’s WIGBANK Index jumped 8.5 percent, the biggest one-day gain in almost three months as Rostowski said the Polish banking system is “healthy.”

Banks led declines this year in Polish equities as they raised provisions for failed bets on currency options and the economy braces for its worst slowdown since 2002. The zloty’s slump compounded problems for companies that bought options from banks last year to bet on an increase in the currency.

Poland’s financial services regulator last week almost tripled its estimate of losses from option deals to as much as 15 billion zloty ($4.1 billion). Polish banks may have to write off as much as 2.25 billion zloty because of companies’ potential losses linked to currency options, the regulator said Feb. 10.

2/17/2009

From 27 April 2009, the Lufthansa CityLine regional airline subsidiary will begin operating five flights weekly on the Frankfurt-Rzeszów route with a Bombardier CRJ-700.

Rzeszów is an important economic and cultural centre in southeastern Poland. Located in the Carpathian foothills, and near the border with Ukraine and Slovakia, the city has become a major communication hub, attracting a number of companies and investors to set up bases there.

Aside from the aviation industry, the city is home to automotive components and mechanical engineering firms. Alongside its business importance, Rzeszów is a major academic centre. It hosts diverse universities providing education to a current 70,000 students, principally in aviation studies and electrical engineering.

“The new flights to Rzeszów will expand Lufthansa’s broad array of services in Poland. With their addition to the network, we will be offering our customers fast and convenient connections to eight Polish cities in different regions,” said Karl-Ulrich Garnadt, Executive Vice President Services and Human Resources Lufthansa Passenger Airlines. “Only a few months ago, Lufthansa augmented the existing connection ex Munich to Poznan by laying on flights there from Frankfurt as well, giving Lufthansa passengers a choice of more than 200 weekly connections to Germany’s neighbouring country.

The Frankfurt to Rzeszów round-trip is available from 99 euros.Source:asiatraveltips.com

2/10/2009

Poland intends to move ahead with its plans for the initial public offer of shares in chemical group Kedzierzyn, a management board member at the state privatisation vehicle told Reuters on Monday.

"Kedzierzyn had splendid results last year, it would be a shame not to use the opportunity to go through with the offer," Wieslaw Skwarko of Nafta Polska agency, which oversees the oil and chemicals sectors, said in an interview.

"A window of opportunity will come in April-May," he said, noting that audited results for the company will be ready by that time.

Kedzierzyn said earlier it aims for about 500 million zlotys ($142 million) from issuing about 30 percent of equity in new shares.

Skwarko said the agency was also determined to move ahead with further privatisations of listed companies Tarnow ATTP.WA and Ciech CECH.WA, but not at all costs.

"We are not going to disregard the market situation ... if the situation is really bad, absolutely hopeless, then we will abandon privatisation plans," he said.

Poland wants to sell strategic stakes in Tarnow, Ciech, and unlisted Kedzierzyn to a single investor who would integrate them and finance further development.

The last IPO in the chemical sector -- Tarnow's debut in April 2008 -- was rescued when state-controlled companies PGNiG PGNI.WA and Ciech CECH.WA bought 16.5 percent of the shares.

Since then, market sentiment has worsened as investors' flight from emerging markets continued. Warsaw's main WIG20 .WIG20 index has this year fallen by more than 14 percent, after shedding nearly half of its value in 2008. ($1=3.516 Zloty) Source:ByPatryk Wasilewski, Pawel Bernat,Hans Peters,reuters.com

Poland's leading refiner PKN Orlen PKNA.WA may delay the sale of its stake in mobile operator Polkomtel and petrochemicals arm Anwil due to weak market condtions, its chief executive was quoted as saying on Monday.

State news agency PAP quoted Jacek Krawiec as saying in Orlen's internal bi-weekly magazine it would be hard to get a satisfactory price for these assets this year.

"Due to the current situation Polkomtel and Anwil sales are in question," Krawiec said. "As we have often said, the exits will happen only if we receive attractive prices, and that could be difficult this year."

Orlen recently raised its stake in Poland's No. 2 cellphone operator Polkomtel to nearly 25 percent from 19.6 percent, but reiterated that it was determined to ultimately exit the investment.

2/06/2009

Poland’s Prime Minister Donald Tusk on Wednesday said his government could delay its 2012 target for the adoption of the euro currency should the global financial crisis pose risks to the Polish currency or financial system.

Before joining the eurozone, would-be members must spend at least two years in the exchange-rate mechanism known as ERM-2 which tests the stability of their national currency.

In order to meet the 2012 euro target date Poland must enter the eurozone’s required Exchange Rate Mechanism (ERMII) in the first half of 2009.

"I’m not sticking to the doctrine that if I’ve said May (for ERMII entry) it must be so," Tusk told Poland’s commercial broadcaster TVN24.

"If it will be the case that (entry into ERMII) will be risky for the Polish currency and our financial system, we will delay it," Tusk said.

The Polish central bank and government insisted Wednesday there was no need for intervention to prop Poland’s currency the zloty, which has plunged to a five-year low against the euro and Swiss franc.

The zloty tumbled from 3.50 to the euro in September 2008 to a five-year low this week hovering around 4.50.

The fall comes despite forecasts that 2004 EU entrant Poland will be just one of two of the 27 member bloc’s states to achieve economic growth over two percent this year.

Poland committed itself to joining the eurozone and replacing its currency, the zloty, with the euro as part of its 2004 European Union entry agreement. No deadline for the switch was set. Source:montrealgazette.com

2/03/2009

WARSAW, Feb 3 (Reuters) - Polish chemical maker Pulawy had a net loss of 10.2 million zlotys ($3 million) in the second quarter of its fiscal year, compared with a 91.5 million profit a year earlier, the company said.Source:By Adrian Krajewski, John Stonestreetforbes.com

Despite aggressive promotion, the demand for new cars plummeted by over 10% m/m in January, an initial report by Samar Automotive Marker Research Institute is quoted by ‘Puls Biznesu’.REKLAMA

‘December saw massive sales and an increased number of purchases in fear of prices rising due to the deteriorating zloty. The number of cars bought in January was significantly lower’ Wojciech Drzewiecki, head of Samar Institute, is quoted as saying. The drop in sales is expected to deepen because of a price hike. ‘The cars manufactured in 2009 are going to be more expensive by at least 10% because of the unfavourable rate of the zloty to the euro which will be followed by a lower number of purchases and a further slowdown on the market’ Adam Kołodziejczyk, president of Ford Poland, says.

The Volkswagen manufacturing plant in Poznan, central Poland, has already been faced with the diminishing demand for new cars. The factory discontinued production for 3 days due to an insufficient number of orders. Piotr Danielewicz, the spokesman for Volkswagen Poznań, informed that the company had more downtime planned. ‘Cars are produced on specific orders. Due to a drop in demand the production had to be withheld. According to an agreement with the trade unions, Volkswagen is keeping the work places and is not lowering the workers wages. The production stoppage is planned for February 2-4 and 23-27’ he said. Workers are to take days off then, wnp.pl reports.Source:polishmarket.com.pl

WARSAW, Feb 3 (Reuters) - Poland's central bank may cut interest rates again at the February meeting of its rate-setting panel, two hawkish policymakers said on Tuesday, in comments underlining the pace of the country's economic slowdown.

The bank's 10-strong Monetary Policy Council (MPC) has already cut its main rate by 175 basis points to 4.25 percent since November to buttress growth hit by the global crisis and now expected to fall to about 2 percent in 2009. 'We're still in an easing cycle... Every sharp decline in industrial output breaks the balance in the economy. We can't allow for that now,' policymaker Marian Noga told the Gazeta Prawna daily in an interview.

'I do not rule out that in February we might have another rate cut,' said Noga, who consistently backed rate hikes during the bank's previous monetary tightening cycle.

Halina Wasilewska-Trenkner, one of only two council members to oppose November's cut in interest rates, said the chances were equal of the bank cutting rates or making no move when it meets later in February.

She signalled the central bank's inflation projection, which policymakers traditionally obtain before the MPC's February meeting, would be key to the decision.

Noga also said it would be more appropriate now for the central bank to move in cuts of 25-50 basis points. Wasilewska-Trenkner did not elaborate on her preferred scale of easing. In a further sign of the slowdown, the head of the state investment agency said foreign direct investments into the European Union's largest ex-communist member were likely to drop to 7-10 billion euros in 2009 from about 12 billion in 2008.

Labour Minister Jolanta Fedak said on Tuesday unemployment could jump to as much as 12 percent by the end of this year if economic growth continues to slow.

Poland's unemployment has recently started to rise after a prolonged downward trend, hitting 9.5 percent in December.

WARSAW, Feb 3 (Reuters) - Poland's zloty fell 0.5 percent against the euro on Tuesday and hit a key level of 4.50 zlotys against the single currency, Reuters systems showed.

These are speculative moves aimed at breaking stop losses as many people bet that currency options will force companies to buy euros. The weak economic situation adds to the grim outlook,' a trader at a Warsaw bank said.Source:By Kuba Jaworowski, forbes.com

Poland plans to unveil up to 20 billion zlotys in budget savings on Tuesday, as unemployment soars and investment falls, cutting into the previously plentiful income of the European Union's biggest ex-communist state.Economists have slashed forecasts for growth this year as the global financial crisis hit home, raising concerns that a 2009 budget plan prepared almost half a year ago would fall apart due to plummeting revenues.The head of the state's investment agency said on Tuesday that foreign direct investments coming into Poland were likely to drop to 7-10 billion euros in 2009 from about 12 billion in 2008.Labour Minister Jolanta Fedak added that unemployment could jump to as much as 12 percent this year, having fallen into single figures for the first time since Poland's early 1990s transition from communism.Slawomir Nowak, a top aide to the prime minister, said the government would announce a savings plan later on Tuesday and that it had found a planned 17 billion zlotys ($4.89 billion) in savings, despite doubts expressed by analysts.But a government source confirmed for Reuters a media report that the government could increase the value of savings to 20 billion as it seeks to fill the prospective hole in revenues."On one hand it is rationalisation (of spending)," Nowak told Polish broadcaster TVN's morning show. "But the majority is freezing of investments (until later)."ZLOTY HITWhere Western European governments have upped spending to stimulate their economies, Romania and Hungary have led spending cuts by eastern European governments concerned about their ability to bring in external finance.Poland's zloty hit a four-and-half-year low on Tuesday and the large cap WIG 20 bourse index slid close to levels last seen in 2003 as investors continued to dump riskier assets in emerging Europe in favour of more developed western markets.Austrian and Italian officials have also warned in recent weeks that a squeeze on capital for their banks in the region could halt investment in Central Europe's once-booming ex-communist economies.Poland, with a population of 38 million, saw its economy grow 4.8 percent in 2008, down from 6.7 percent in 2007. It is expected to slow even more sharply this year with some even expecting growth close to zero.In response to the spreading economic gloom, growing fears over job security and weakening consumption, the central bank has cut interest rates three times since November, by a total of 175 basis points, bringing the key rate down to 4.25 percent.Underlining the pace of the country's economic slowdown, two of the three most persistent hawks on the central bank's 10-strong Monetary Policy Council (MPC) called on Tuesday for another rate cut this month.The deteriorating outlook in Poland has prompted even the most hawkish members of the central bank's MPC to back a further rate cut this month."We're still in an easing cycle... Every sharp decline in industrial output breaks the balance in the economy. We can't allow for that now," Marian Noga, who had consistently backed rate hikes during the bank's previous monetary tightening cycle, told the Gazeta Prawna daily in an interview. Source:Adrian Krajewski and Kuba Jaworowski, /business/feedarticle/8340065

In response to the sharply slowing economy, easing inflation and the global crisis, the central bank began to lower borrowing costs in November 2008 and has reduced its benchmark rate three times by a total of 175 basis points to at 4.25 percent. he finance ministry said on Monday it expected price growth to have eased to 3.2 percent in January, from 3.3 percent in December -- moving closer towards the bank's 2.5 percent target.

'I believe that there should be more rate cuts fairly quickly,' Czekaj told daily Rzeczpospolita in an interview released on Monday.

'Maybe the proper level for the (key) rate would be 3.5 or maybe 3 percent ... If the economy will be growing slowly it cannot be excluded that we will need to lower the rate to below 3 percent.' Czekaj is a key swing-voter on the 10-strong MPC.

He also said that he saw no reason for delaying or dropping the government's ambitious plans for euro adoption in 2012 because of the sharp global and domestic economic slowdown.

'There is no such need,' he said. '...ERM 2 entry could calm the situation on the currency market.'

Many analysts say that pushing ahead with euro adoption in 2012 could be too risky because high market volatility and the global crisis would make it harder for the zloty currency pass one of the entry tests, spending two years proving its stability in the pre-euro ERM 2 currency grid. Analysts expect more interest rate cuts but remain split on where the key rate will end this year and how low it will fall in this easing cycle. The median forecast in the latest Reuters poll places the key rate at 3.25 percent in December.

Although the Polish Purchasing Managers' Index (PMI) rose to 40.3 points in January, the first rise in the index since February 2008, it is still well below the 50 growth/contraction divide, showing the manufacturing sector remains weak.

'Overall, the first batch of 2009 PMI data point to further aggressive rate cuts by the central bank in the first quarter,' said Trevor Balchin, economist at Markit Economics, which compiles the PMI data. 'Inflation concerns have eased despite the falling zloty, as the PMI showed further falls in price pressures in manufacturing.'

Poland's gross domestic product (GDP) growth in 2008 eased to 4.8 percent, from 6.7 percent in 2007, preliminary statistics office estimates showed last week, and some analysts said the sharp slowdown in investments last year indicated more trouble ahead for the Polish economy. Source:By Karolina Sowikowska,Ruth Pitchford, forbes.com

1/30/2009

A string of dreary statistics this week shows that the once-booming economy has started to sputter: manufacturing fell significantly at the end of last year, unemployment shot up and officials are finally admitting that Poland is hurting.

Poland "will not be an island resistant to trends outside its borders," Prime Minister Donald acknowledged Tuesday as he announced a plan to seek budget savings this year to cover a likely shortfall in state revenues.

For months, Poland's leaders and economists insisted the country could avoid the global turmoil thanks to its healthy banking sector and low mortgage and consumer debt levels.

Shoppers kept spending at the gleaming new malls that have mushroomed in recent years across Poland — by far the largest of 10 formerly communist countries that have joined the European Union in recent years.But the days of denial have now passed.

"Everybody is worrying," said Maja Goettig, chief economist for BPH Bank in Warsaw. "The outlook is worsening each month, and the question is how big this slowdown will be. We've just entered it — and nobody knows when it will end."

The economy that grew at a brisk 6.7 percent in 2007 — swelling the ranks of a middle class with money to spend on fine wines, fancy cars and large homes — slowed to a still-healthy 4.8 percent in 2008, according to figures released by the government's Central Statistical Office Thursday.

Data released this week have shown that Poland felt a chill toward the end of the year as the global crisis hit the country's western European neighbors and the United States. Unemployment rose in December for the second straight month, reaching 9.5 percent — due in part to a slowdown in the manufacturing sector as foreign orders fall.

Industrial production in November fell 8.9 percent over the previous year; data released Tuesday showed another 4.4 percent year-on-year fall in December.

The same day, the central bank cut interest rates by a hefty three-quarters of a percentage point for the second consecutive month. It cited a "stronger than previously expected economic slowdown" in cutting its benchmark rate to 4.25 percentAs worries deepen, Poland's zloty has depreciated significantly in recent months against major currencies like the euro and the U.S. dollar.

The question now is how bad things will get. Many experts still believe Poland can weather the storm better than other European countries and manage modest growth in 2009, although it exports heavily to countries already in recession.

Goettig says her bank predicts 2 percent growth for now, but expects to revise that downward to zero growth. Tusk, the prime minister, said the government's "pessimistic" scenario is for 1.7 percent growth.

Another source of instability comes from the fact that many of the Poles who bought homes in recent years took out mortgages in Swiss francs. Now that the zloty has declined, some are finding it harder to repay their loans.

Despite the souring mood, there are some reasons for optimism.

Polish banks are tightly regulated and were never burdened by the toxic assets that have brought down financial institutions elsewhere. Economy Minister Waldemar Pawlak says Polish banks, mostly owned by large Western European banks, are often in a much better situation than their parent companies.

And bucking the larger trend, retail sales in December grew 6.6 percent over the same month in 2007, better than experts expected.

However, the state statistics office said this week that consumer confidence is now falling.

Agata Lagan, who runs a string of high-end clothing shops throughout Poland, attests to that. She said December sales fell by 30 percent in her Lilla Moda shops in Warsaw year on year.

Another factor weighing on profits is that the battered zloty has made it more expensive to import the goods.

"Usually when we have a new collection, the shops are full of customers ready to shop on the first and second days," she said. But when a new collection arrived two weeks ago, the crowd was less than half the usual size.

Poland supports the Azeri drive to join European nations as a reliable and diverse energy partner, Poland's Ambassador to Azerbaijan Kshishtof Krayevski said.

Krayevski said in an interview with Azeri news agency Today.Az that 2008 was a significant year for strengthening relations between Warsaw and Baku, noting the participation of Polish President Lech Kaczynski at a major energy summit in Baku in November.

"We always support Azerbaijan's intention to integrate with the Euro-Atlantic structures; we are cooperating in the sphere of diversification of energy supplies to Europe," the envoy said.

Europe put renewed focus on energy diversity in 2008. January 2009 brought increased emphasis on that goal following a decision by Russia to halt gas supplies to Europe following a debt row with Ukraine.

The envoy addressed the crisis, noting that while Warsaw and Moscow are important partners in the energy sector, the European Union needs to focus on alternative gas routes as 80 percent of the Russian gas for Europe travels through Ukraine.

"I think the conflict between Russia and Ukraine proved the importance and the need to diversify energy supplies," he said. "It turned out that Europe, including the EU states such as Poland, Slovakia and Bulgaria, are too dependent on supplies from Russia."Source:upi.com